(Washington, DC) – U.S. Senator Jeanne Shaheen (D-NH), Chair of the U.S. Senate Committee on Small Business and Entrepreneurship, today wrote to Small Business Administration (SBA) Administrator Isabel Guzman to highlight issues with the agency’s decision to move forward with the approval of a Small Business Lending Company (SBLC) license for Funding Circle, a company whose U.K.-owned parent recently stated that it is seeking to sell its U.S business.

In a letter sent today, Chair Shaheen wrote, “Awarding a license to a company that is preemptively seeking to offload its operation even before receiving its full approval or making a single SBA loan would be unprecedented and, in my view, extremely unwise.”  

“SBA’s mission is too important to grant loan-making authority to a lender that is not fully committed to the agency’s programs,” wrote Chair Shaheen. “Given that your oversight division, the Office of Credit Risk Management, will have sole responsibility for regulating the licensee and ensuring that its capital reserves are adequate, the identity of the new parent company is a critical piece of information that SBA should have before granting the entity the authority to make loans.”

Funding Circle was among the three applicants that SBA provisionally selected in November to receive an SBLC license, which allows non-federally regulated lenders to make SBA-backed loans. However, it came to light last month that Funding Circle’s parent company has expressed reservations about its involvement in SBA programs and is seeking to sell its U.S. business. On an earnings call on March 7th, the parent company’s CEO stated that the 7(a) program “requires a significant amount of cash and capital to grow the SBA proposition and we don’t believe that this is the best course of action for the group.”

The announcement of a potential sale came just four months after SBA’s provisional approval of Funding Circle. Questions remain as to whether the lender kept the agency updated on the planned sale even as it was seeking final approval for its application.

In the letter, Chair Shaheen continued, “If Funding Circle actively shopped itself while its application was under review without telling SBA, that lack of communication should weigh heavily against it as SBA evaluates its fitness to participate in SBA’s lending programs.”

Last spring, the agency finalized two new rules that collectively lifted the decades-old moratorium on the expansion of the number of SBLCs and loosened affiliation and underwriting standards for SBA lenders. Senators from both parties were concerned that SBA did not have adequate staff and resources to permit an unlimited number of new entrants into SBA’s lending programs. In response, Senator Shaheen, along with 17 other Senators, voted in July to advance bipartisan legislation out of the Small Business Committee that would place guardrails around SBA’s lending programs and cap the number of SBLCs at seventeen.

Full letter text can be found here.